At tax time, anything that can help save you money off your tax bill is highly welcomed. These two tax items can put more money in your wallet, where you need it most.
Deductions are a great way to reduce the amount you owe in taxes at the end of the year. Expenses that you have accrued throughout the year may be deductible on your tax return, which essentially saves you money. Taxpayers are able to take a standard deduction of $6,200 for single individuals (double for joint filers). Those who are 65 or older, or legally blind, have a higher standard deduction amount.
If your expenses total more than your allowable standard deduction, you can chose to itemize. You’ll need documentation of your expenses, such as receipts, should you opt for itemizing your deductions. You don’t need proof if you choose the standard deduction. Also, higher income taxpayers are subject to itemized deduction restrictions. Taxpayers with adjusted gross income greater than $254,200 single, ($305,050 married) are in this restricted bracket for itemizing.
If you support another individual they may qualify as a dependent as tax time. You can claim a dependency exemption, which is equivalent to a $3,950 reduction of your taxable income. Each dependent is worth an exemption. If you’re a parent, your dependents under age 17 may also qualify for a tax credit of up to $1,000. Like deductions, there is a restriction on exemption value for those in the higher income bracket.